Question

The effects of specific events that occur over the life of a bond are reported on the statement of cash flows. Determine whether each of the following events affects the statement of cash flows. If so, describe the impact and specify where the effect is reported on the statement.
1. A $ 1,000,000 bond is issued at a discount in 2013. The carrying amount of the bond reported on the statement of financial position on that date is $ 985,000, before any amortization of bond discount.
2. At year- end, accrued interest amounts to $ 50,000, and $ 1,000 of the bond discount is amortized by using the effective- interest method.
3. Early in 2014, the accrued interest is paid. At the same time, $ 8,000 of interest that accrued in 2014 is paid.